Review on IKEA Company

Founded in Sweden in 1943, Ikea is the world’s largest furniture retailer. Selling ready to assemble furniture, Kitchen appliances and Home accessories. Currently with ten large warehouse style stores in Australia, Ikea is launching a new reimagining of their classic style, with smaller “touchpoint” stores in high density areas. Allowing for a greater range of customers to access their stores. The aim of which is to increase customer satisfaction and value, to ultimately increase customer retention and loyalty. This falls in line with relationship marketing, which can be defined as the overall process of building and maintaining profitable consumer relationships by delivering superior customer value and satisfaction.

Customer relations and loyalty is centred upon the provision of exceptional customer satisfaction and value. Recognising that the profitability of a particular relationship with customers increases over time and that the creation of “good profits” are better for the long-term welfare of the company and their earnings. The perceived value of a good/service is based upon a customer’s evaluation of the costs and benefits associated with their purchase. Consumer satisfaction is the degree of which a customer is satisfied with a service, product or experience, in this case Ikea aims to strengthen the customer experience with a more streamlined approach to purchasing furniture from their stores. There is a strong influence on customer loyalty that convenient and accessible store locations have.

Ikea has invested the financial resource to roll out a range of smaller stores, in what they term as “touchpoint stores” to a larger degree of areas. This removes the need of potential buyers whom live far away from their large stores to travel the distance and experience what they have on offer. These stores customers are able to touch and interact their range of goods, with their classic arrow walkways directing shoppers through zones of inspiration of how to implement the products into their own households. The experience of a customer, weather if be positive or negative can have a profound effect upon their purchasing decision. Tailoring the experience of a shopper to make it more streamlined in their buying decision, lessens the burden on consumers and maximises their satisfaction and subsequent experience with their stores. Moreover, Ikea’s new stores will be without their standard self-service, in which customers had to find their items in various isles. Consumers did not like the “hassle of going around and around to pick up this one, isle five, compartment six, going back and forth”. Instead they are shifting towards a more online approach, with the customers being able to select their purchases online and for them to be sent to their house, removing the need to carry around large flatpacks of furniture. Smaller items are still able to be purchased normally. Shoppers no longer have to face the hassle of searching and carrying their own flat-pack furniture home and with improvements to their customer service, means that the hassle of building Ikea furniture is greatly minimized.

With a market share of 13.45%, Ikea falls behind its largest competitor Harvey Norman which holds a 21.6% share of the furniture market. As of the 2017 financial year, Harvey Norman has seen significant increase of its earnings, up by 13.6%. Despite no new store openings, the focus of Harvey Norman upon its ecommerce division has played a significant role in is growth. Their 2 hour click and collect, quick buy and same day delivery being a major selling point of their goods. Moreover, changing consumer trends, leanings towards online buying and shopping has been a significant area of the market that Ikea aims to capitalise on. As such, Ikea has invested significant financial resources into the opening of new distribution centres to aid their new stores as well as shift towards the ecommerce market share. Moreover, they are closely working with online retailers like Amazon and Alibaba to bring their range of products to a wider audience. With this it becomes even easier and more convenient for customers to buy Ikea furniture, with these sites being able to provide low shipping cost. A greater ease of access to Ikeas range of furniture, it helps expand their brand presence to a larger more diverse area.

The successful rollout of new stores and online marketplace should see an increase in the level of customer retention and in effect a steady increase in profits. Johnson, Anderson and Fornell (1995) has found that the level of customer satisfaction of a previous purchase plays an important role in future purchasing decisions. Through this it is evident that the focus on term quality and satisfaction of their products and customers respectively, should see growth in Ikeas long-term profits. The with Ikea family loyalty program as well as their push towards the ecommerce field should help significantly improve the level of customer satisfaction in the purchasing of goods, removing the hassle that may have originally been present. In the long term with high levels of customer retention should see an increase in their sale of goods, as repeat customers become more frequent and those whom mtove up the “loyalty ladder” rise. Moreover, with their push into a wider area as well as increases into product quality, there should be a positive influence on their brand image and equity, thus this sets the foundation for better marketing investments and sales. Avery, Steenburgh, Deighton and Caravella found that there was a positive relationship between the new stores and customer acquisition, noting that “the store seemed to act as a billboard for direct channels… by attracting customers at a faster rate … then if it the store never opened “ as such new store openings should see an boost to sales both in store and online, as well as build up brand equity as their products are “advertised" in a larger area.

Ultimately, Ikea through their implementation of new “touchpoint” stores, online marketing and shift to Australian produced goods, should see an improvement of their customer retention and in effect customer loyalty. Through a more streamlined shopping approach customer satisfaction is greatly improved with the hassle of finding and purchasing goods minimised. Their perceived value of their goods should rise as of their improvements to their quality of goods and their ease of access. The move by Ikea will lead to greater long term profits, off the back of strong consumer retention and likewise spending over the course of their shopping lifetime.